Pepco's Customers Can Save Millions

By Amory Lovins; the writer is director of research at Rocky Mountain Institute, Old Snowmass and Colo. This article is based on testimony before the D.CBy Amory Lovins; the writer is director of research at Rocky Mountain Institute, Old Snowmass and Colo. This article is based on testimony before the D.CDecember 12, 1985

In a curious twist of events, efforts by Potomac Electric Power Company to help its customers save money by using electricity more efficiently were recently challenged before the D.C. Public Service Commission by one of Pepco's largest groups of customers, the Apartment and Office Building Association. AOBA argued that Pepco's recent sharp increase in electricity demand will outstrip generating capacity within a few years, that Pepco's conservation load management program will not bridge the gap, and therefore it is imperative for Pepco to begin immediately constructing a new power plant. This advice flies in the face of impressive results achieved by various utilities in delivering reliable energy services at the least cost.

Pepco's load management program may not be sufficient to meet all new demand growth, but the range of available efficiency technologies as well as tried-and-proved utility incentive programs conclusively show that constructing a new power plant would deprive Pepco's customers of multibillion-dollar rate savings that would accrue from cost-effective efficiency investments. Indeed, by such investments, a typical utility willing to spend two cents to save a kilowatt hour could save about three-fifths of all the electricity it now sells; or by spending half a cent to save a kilowatt hour, it could save more than two-fifths of all electricity it now sells.

How would such savings be achieved? Take lighting sys3>tems as an example. The World Bank now saves $500,000 per year because it recently installed $100,000 worth of highly efficient hallway lights and other simple changes. This investment was "paid back" in less than three months. Basic retrofits of commercial buildings have saved an average of 27 percent of total electric demand at 40 cents per square foot -- a few months' "payback." More than 75 percent reduction in fanpower for ventilation systems, with a 1.5-year payback, was achieved by Hewlett-Packard through the use of electronically controlled Adjustable Speed Drives. Commercial lighting and air-conditioning probably account for two-thirds of Pepco's total commercial sector demand (which makes up two-thirds of Pepco's total demand). Retrofitting these buildings with the best technologies, with paybacks in a few years, can readily save upward of 70 percent of consumption.

Similar savings are available in the residential sector, which accounts for 25 percent of Pepco's demand. Based on calculations that I have performed for other utility service territories, it is very possible for Pepco to make money through an aggressive efficiency-incentives program that would help its customers secure more than half a billion dollars in annual net savings.

How, one might ask, would Pepco make more money by promoting the selling of less electricity? First, efficiency generally costs less than just running power plants and therefore cuts operating costs just as if Pepco had obtained, say, a contract for purchased power at a cent per kilowatt hour. Pepco would benefit even if its absolute sales of electricity declined, provided that its costs fell by more than its revenues. Second, postponing or avoiding construction of new capacity also reduces revenue requirements. Finally, postponing or avoiding the eventual replacement of power plants further reduces revenue requirements. Further kinds of economic savings are also possible, for example, in environmental costs.

Utilities around the country offer clear evidence of "win- win" solutions that can be achieved by a utility offering its customers cash rebate programs to invest in more efficient electricity-consuming devices. Pepco and its customers ca profit handsomely from these proven programs.